A House panel on Wednesday approved legislation that would ensure online lenders can continue to partner with banks to make loans at interest rates that exceed state caps.

The measure, sponsored by Rep. Patrick McHenry, R-N.C., and co-sponsored by two Democrats, passed the House Financial Services Committee by a 42-17 vote. A key legislative priority for the online lending industry, the bill has drawn strong opposition from consumer advocacy groups.

The legislation seeks to blunt the impact of a May 2015 decision by a federal appeals court panel.

In that case, Madden v. Midland Funding, the Second Circuit Court of Appeals ruled that when a bank sold the charged-off credit card debt of a New York state resident to a nonbank, the Empire State’s interest rate cap applied. As a result, high-cost debt that otherwise could have been collected by the bank that made the loan was deemed uncollectible once the debt was sold.

Rep. Patrick McHenry called the House panel’s vote an important step to promote financial inclusion and to ensure that low-income and middle-income Americans can access the financial markets. Bloomberg News

The court decision is only binding in New York, Connecticut and Vermont. Still, it has had a substantial impact on the online lending industry, since nonbank firms often partner with banks in an effort to avoid state interest rate caps. The banks typically originate the loans and sell them a short time later.

LendingClub and Prosper Marketplace offer consumer loans at annual percentage rates as high as 35%, while other online lenders offer more expensive credit. The civil usury cap in New York state, which has some of the strictest laws in the country, is 16%.

Following the Second Circuit decision, some online lenders stopped making loans to residents of New York, Connecticut and Vermont at rates that exceed those states’ usury caps. They also fear that courts in other states will adopt the Second Circuit’s reasoning.

Last year the U.S. Supreme Court last year declined to hear an appeal of the Second Circuit’s decision, and the online lending industry subsequently turned its attention to Capitol Hill for a legislative remedy.

“This legislation will restore consistency to the application of lending rules across state lines and ensure that certain technology company services can continue to partner with banks to expand access to credit nationwide,” Brian Peters, executive director of Financial Innovation Now, a trade group, said in an emailed statement following Wednesday’s vote.

McHenry called the House panel’s vote an important step to promote financial inclusion and to ensure that low-income and middle-income Americans can access the financial markets.

But many consumer advocacy groups argue that the legislation will make it easier for payday lenders to charge interest rates that exceed state rate caps.

“The bill wipes away the strongest available tool against predatory lending practices,” groups including the Center for Responsible Lending and the National Consumer Law Center wrote in a Nov. 13 letter to members of Congress.

“Strong state rate caps, coupled with effective enforcement by states, remain the simplest and most effect method to protect consumers from the predatory lending debt trap.”

Prior to the panel’s vote on Wednesday, Rep. Gregory Meeks, D-N.Y., who is one of the bill’s co-sponsors, fired back at the bill’s critics. “Any suggestion that this bill is a back door for payday lenders is false,” he said.

In July, Sen. Mark Warner, D-Va., introduced a companion to the House bill. That bill has one Democratic co-sponsor, but it was not included in a bipartisan Senate deal on financial regulation that was unveiled Monday.

The House legislation was one of 23 bills approved by the GOP-led Financial Services Committee on Tuesday and Wednesday, most of which attracted at least some Democrats’ votes. The markup was part of an effort to pass some discrete regulatory relief measures while lawmakers also debate more comprehensive relief proposals.

A larger regulatory relief proposal by Rep. Jeb Hensarling, R-Tex., passed the House in June, but it was viewed as too extreme for the Senate, where it would need some Democratic support. Many of the bills that the Financial Services Committee passed this week were part of the bigger package that Hensarling earlier shepherded through the House.

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